PV in prices – the hard sell

Paula Mints

As many company continue to feel the solar squeeze, Paula Mints gives us a picture of solar PV industry dynamics.

Currently it seems as if prices for solar photovoltaics (PV) change by the minute, with rumours of ever lower prices. These lower prices are in many cases referred to as “progress and proof” of reaching ‘grid parity’ – but they are coming at a cost.

The recent extremely low prices have driven almost all manufacturers to low or negative margins, losses instead of profits and in some cases, failure (or major cutbacks in production). The tension rope between buyers and sellers is taut.

However, with a considerable amount of confusing pricing information currently being repeated in the market, it is important to remember that prices for re-sold manufacturer and demand side inventory should not be confused with the average price of technology to the first buyer, nor should they be taken to represent progress.

2011: The year of losing money

In 2011, the extreme low technology prices for solar PV were no longer the direct result of aggressive pricing, but an indirect product of this practice. Prices were held down, and continue to be held down in 2012, by high levels of manufacturing capacity (∼35 GWp); high levels of inventory for both demand (∼3.6 GWp) and supply (>2 GWp); and decreasing inventory along with rumours of extremely low prices.

Rumours of low prices push expectations along the value chain, and these expectations become a reality when buying is delayed until the expected price is offered. This may be good for end-users, but on the flip side, the current low prices are leading to low or negative margins, and to the failure of several manufacturers.

The current period of PV industry consolidation, although long expected, is rendered far worse by continued, unrealistic low prices for solar PV. Artificially low prices for the technology are exacerbating the normal tension between buyers and sellers along the PV value chain.

Low prices for crystalline technology are having a particularly negative effect on thin-film manufacturers, who are struggling to survive in the current competitive climate.

Some points of comparison from 2010 to 2011:

  • Thin-film Average Selling Prices (ASPs) fell 42% in 2011, from US$1.35/Wp in 2010 to US0.78/Wp;
  • Cell ASPs fell 38% in 2011, from US$1.15/Wp in 2010 to US$0.71/Wp;
  • The ASP for a crystalline module to the first buyer in 2011 was US$1.44/Wp;
  • The global average for all buyers, regions, countries and technologies in 2011 was US$1.37/Wp;
  • Module ASPs for large quantity buyers decreased by 14% in 2011 over 2010, from US$1.48/Wp to US$1.28/Wp;
  • Module ASPs for mid-level buyers decreased by 29% in 2011 over 2010 from US$2.36/Wp to US$1.67/Wp; and
  • Module ASPs for small quantity buyers in 2011 over 2010 fell 24% from US$2.90/Wp to US$2.21/Wp.

An ‘easy way in’

During the 2004 to 2008 boom, investment in thin-film technologies became highly interesting to venture and investor groups who, observing the increase in the price of polysilicon due to constrained capacities, assumed that low-cost manufacturing would be the key to success.

Given the high cost per kilogram of polysilicon (at one point over US$400/kg), and the increasing price of crystalline modules, an assumption was made that the price of crystalline modules would continue to rise, while the price of thin-film panels would continue to fall.

During this period equipment manufacturers such as Applied Materials and Oerlikon entered the market. Sales of some thin-film turnkey equipment seemed to offer a faster entry for those wishing to enter the PV market, despite not having a solar PV background.

The conundrum

The conundrum for thin-films, and this holds true for all PV technologies, is how to sell the true value and positive attributes of the technology to a market that has been trained to think cheap.

Solar PV industry pricing to the first buyer from 2001 through 2011 (with an estimate for 2012), range from US$0.50/Wp to >US$3.00/Wp. The average price for PV technologies is heavily weighed by crystalline silicon (C-Si) prices with C-Si accounting for 86% of the market for PV technologies in 2011.

In general, thin-film technologies need to be priced at a level 12% lower than ‘conventional’ PV, due to the larger area needed to compensate for lower efficiency.

And now what?

The theme at three recent conferences in Europe was a combination of: Where do we go from here; and: What now? Both are good questions.

During the recent boom in demand (from 2004 through 2010) the industry should have planned for a future low-incentive environment. However, before the industry loses itself in gloom, it should remember that the difficult years before the boom years made it highly innovative, and instilled in it survival skills that are rarely found in other industries.

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Photovoltaics (PV)  •  Policy, investment and markets  •  Solar electricity